Aptos, a much-hyped Layer 1 blockchain, went live yesterday to a chorus of doubt.
Despite a 47% drop on the first day of trading, Aptos’ APT token already stands at a $971M market cap, according to CoinGecko.
Criticism has been wide-ranging — Cobie, one of crypto’s leading influencers, expressed dissatisfaction at major crypto exchanges’ decision to list APT before the team released basic details about the token.
Cobie’s gripe was that people should have access to information like APT’s total supply and emissions schedule before buying the asset.
Binance, FTX and Coinbase, the top three exchanges in terms of volume, announced that they would support the token.
As exchanges earn fees on trading volume, they have a clear incentive to list hyped projects’ tokens. Indeed, APT is Binance’s third-highest token in terms of volume on the day, second to only Bitcoin and Ether.
Aptos subsequently released an overview of APT tokenomics on Oct. 18 before FTX and Binance opened spot trading on Oct. 19.
The largest initial allocation of tokens at 51.02% will go to what the project calls “community,” with 19% going to core contributors, 16.5% to the foundation behind the blockchain, and 13.48% to investors. Staking rewards will contribute a larger percentage of the total token distribution as time goes on.
Of the projects listed in an oft-cited diagram from Messari which details pre-launch token allocations for Layer 1 blockchains, Aptos’ token distribution most closely resembles Solana’s.
Aptos didn’t conduct a public token sale, and Solana had one for only $1.76M. Both projects allocated a large percentage of tokens to their foundations, with the large slices of tokens going to both core contributors and investors.
‘VC Sham Chain’
Others took issue with Aptos being promoted by venture capital funds that were able to acquire tokens in private rounds. DCInvestor, an important voice in the crypto community, called Aptos a “classic VC sham chain,” adding that it had every red flag he could imagine.
Aptos raised $150M in a series A in July that was led by FTX’s venture arm alongside Jump Crypto.
Coinbase Ventures and FTX also invested in what Aptos’ co-founder and CEO Mo Shaikh called a $200M “strategic round” in March. Binance made a “strategic investment” in Aptos in September.
Ryan Watkins, co-founder of crypto-focused hedge fund Pangea Fund Management, echoed the sentiment about Aptos reverberating around social media.
“I just think it’s a story we’ve heard before,” he told The Defiant. “[A] New chain launches with big promises of speed and scalability. [It] promises to solve all the challenges that plague the industry. But post-launch, [Aptos] ultimately faces a long road like every other chain that’s come before them.”
Watkins, previously a research analyst at Messari, authored the analysis of blockchains’ pre-launch token allocations.
Indeed, Aptos’ mainnet launch and immediate listing on major exchanges come during a hangover period from 2021 when Layer 1 blockchains like Solana, Avalanche, Terra, and others all saw their tokens’ valuations rise exponentially over the course of the year.
Layer 1 Trade
The Layer 1 trade, as it was commonly called, fell apart this year — SOL is down 88% from its all-time high, AVAX is down 89%, and Terra’s LUNA completely collapsed.
This has made Aptos a tough pill for the crypto community to swallow, especially considering the hundreds of millions in capital it raised before launching its blockchain to the public.
That being said, a significant amount of work has gone into Aptos.
“We are the original creators, researchers, designers, and builders of Diem,” says co-founder Mo Shaikh’s post introducing Aptos. Diem is the digital currency project started by Facebook (now Meta) that was abandoned early this year.
Aptos features the Move programming language, which is an executable bytecode language used to implement custom transactions and smart contracts, according to Diem’s website. The project touts a host of other features in a post by Avery Ching, the project’s other co-founder.
Aptos has its backers too.
Tom Dunleavy, a research analyst at Messari, posted on Twitter that he is bullish on Aptos and that a deep dive on the project from the crypto research company is forthcoming.
Slow Transaction Speeds
Well-known DeFi trader DeFiFrog underscored the three transactions per second (TPS) Aptos appears to be processing, compared to the 160,000 TPS the blockchain is supposed to be capable of processing, according to a Medium post.
In response to an email from The Defiant, a spokesperson for Aptos clarified that the TPS displayed on its block explorer showed current transaction speeds, not the blockchain’s maximum capacity.
It’s worth noting that as of Oct. 19, TPS has climbed to around 24, according to Aptos’ block explorer, which is faster than Ethereum mainnet.
Action is still swirling around crypto’s newest Layer 1. Aptos has announced an airdrop for over 100,000 users who previously performed certain actions on the blockchain’s testnet.
In all, it’s been a wild first couple of days for Aptos — the project’s rocky start even compelled Shaikh to address some of the criticism on Twitter, including about the tokenomics, the TPS, and also accusations that the process to become a validator on the network isn’t permissionless.
Watkins, for one, believes that promising world-changing blockchain technology is the easy part. “Ecosystems take years to build out. Correct design takes years of live experimentation to arrive at,” he said, citing Ethereum as an example.
“Expectations will begin high and then fall off a cliff as reality sets in. Then [Aptos] will need to prove itself like everything else.”
If one thing is clear, it’s that reality sets in a lot faster in a bear market.